The article focused on how states are planning to raise additional revenue from tax audits, and contacting companies who they believe to have established "nexus" in their state. "Nexus" is basically being considered to have a taxable presence in a state.
As the article states, I agree, it is getting more difficult to side-step nexus, since more states are considering companies to have nexus without having a physical presence in the state. You may have heard the terms, "economic nexus" or "Amazon nexus." Those are two of the most recent tools or weapons the states are using to collect additional revenue from out-of-state companies.
As I stated many times on this blog, the article also confirms that states are utilizing combined reporting or "unitary" rules to pull more companies into the reporting group filing a return within their state. Obviously, this is done with the hope that it will increase the state's revenue.
Conclusion
It is no secret states are hurting financially. They are looking for revenue anywhere they can find it, but also trying not to raise taxes (at least obviously raising taxes). They are short on resources and looking for the easiest or best ways to increase their revenue (just like any business is doing). Therefore, look for increased audit activity, nexus questionnaires, notices for filing late, or notices charging additional penalties or interest. Also, look for states to be less negotiable when trying to get penalties waived.
With that said, most companies' tax departments are short staffed as well, trying to do too much with too little. Focused on compliance or the "necessary evils" that must get done, tax departments may have trouble keeping up with the daily changes in the state tax world.
Question: What are you or your clients struggling with?
- Increased audit activity?
- Notices?
- Nexus issues (Amazon nexus, Economic nexus)?
- Penalties?
- Unitary or Combined reporting?
- Apportionment issues?
- Business versus Nonbusiness Income?
- Something else?
Please post a comment to answer this question or e-mail me at leveragesalt@earthlink.net. I would love to get your feedback. Thanks.